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Chapter 02
Consolidation of Financial Information
Multiple Choice Questions
1. At the date of an acquisition which is not a bargain purchase, the acquisition
method
A. consolidates the subsidiary's assets at fair value and the liabilities at book value.
B. consolidates all subsidiary assets and liabilities at book value.
C. consolidates all subsidiary assets and liabilities at fair value.
D. consolidates current assets and liabilities at book value, long-term assets and
liabilities at fair value.
E. consolidates the subsidiary's assets at book value and the liabilities at fair value.
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2. In an acquisition where control is achieved, how would the land accounts of the
parent and the land accounts of the subsidiary be combined?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
3. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will
continue to exist as a separate corporation. Entries for the consolidation of Lisa
and Victoria would be recorded in
A. a worksheet.
B. Lisa's general journal.
C. Victoria's general journal.
D. Victoria's secret consolidation journal.
E. the general journals of both companies.
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4. Using the acquisition method for a business combination, goodwill is generally
defined as:
A. Cost of the investment less the subsidiary's book value at the beginning of the
year.
B. Cost of the investment less the subsidiary's book value at the acquisition date.
C. Cost of the investment less the subsidiary's fair value at the beginning of the
year.
D. Cost of the investment less the subsidiary's fair value at acquisition date.
E. is no longer allowed under federal law.
5. Direct combination costs and stock issuance costs are often incurred in the
process of making a controlling investment in another company. How should
those costs be accounted for in a pre-2009 purchase transaction?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
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6. How are direct and indirect costs accounted for when applying the acquisition
method for a business combination?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
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7. What is the primary accounting difference between accounting for when the
subsidiary is dissolved and when the subsidiary retains its incorporation?
A. If the subsidiary is dissolved, it will not be operated as a separate division.
B. If the subsidiary is dissolved, assets and liabilities are consolidated at their book
values.
C. If the subsidiary retains its incorporation, there will be no goodwill associated
with the acquisition.
D. If the subsidiary retains its incorporation, assets and liabilities are consolidated
at their book values.
E. If the subsidiary retains its incorporation, the consolidation is not formally
recorded in the accounting records of the acquiring company.
8. According to GAAP, the pooling of interest method for business combinations
A. Is preferred to the purchase method.
B. Is allowed for all new acquisitions.
C. Is no longer allowed for business combinations after June 30, 2001.
D. Is no longer allowed for business combinations after December 31, 2001.
E. Is only allowed for large corporate mergers like Exxon and Mobil.
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9. An example of a difference in types of business combination is:
A. A statutory merger can only be effected by an asset acquisition while a
statutory consolidation can only be effected by a capital stock acquisition.
B. A statutory merger can only be effected by a capital stock acquisition while a
statutory consolidation can only be effected by an asset acquisition.
C. A statutory merger requires dissolution of the acquired company while a
statutory consolidation does not require dissolution.
D. A statutory consolidation requires dissolution of the acquired company while a
statutory merger does not require dissolution.
E. Both a statutory merger and a statutory consolidation can only be effected by
an asset acquisition but only a statutory consolidation requires dissolution of
the acquired company.
10. Acquired in-process research and development is considered as
A. a definite-lived asset subject to amortization.
B. a definite-lived asset subject to testing for impairment.
C. an indefinite-lived asset subject to amortization.
D. an indefinite-lived asset subject to testing for impairment.
E. a research and development expense at the date of acquisition.
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11. Which one of the following is a characteristic of a business combination
accounted for as an acquisition?
A. The combination must involve the exchange of equity securities only.
B. The transaction establishes an acquisition fair value basis for the company
being acquired.
C. The two companies may be about the same size, and it is difficult to determine
the acquired company and the acquiring company.
D. The transaction may be considered to be the uniting of the ownership interests
of the companies involved.
E. The acquired subsidiary must be smaller in size than the acquiring parent.
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12. Which one of the following is a characteristic of a business combination that is
accounted for as an acquisition?
A. Fair value only for items received by the acquirer can enter into the
determination of the acquirer's accounting valuation of the acquired company.
B. Fair value only for the consideration transferred by the acquirer can enter into
the determination of the acquirer's accounting valuation of the acquired
company.
C. Fair value for the consideration transferred by the acquirer as well as the fair
value of items received by the acquirer can enter into the determination of the
acquirer's accounting valuation of the acquired company.
D. Fair value for only consideration transferred and identifiable assets received by
the acquirer can enter into the determination of the acquirer's accounting
valuation of the acquired company.
E. Only fair value of identifiable assets received enters into the determination of
the acquirer's accounting valuation of the acquired company.
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13. A statutory merger is a(n)
A. business combination in which only one of the two companies continues to
exist as a legal corporation.
B. business combination in which both companies continues to exist.
C. acquisition of a competitor.
D. acquisition of a supplier or a customer.
E. legal proposal to acquire outstanding shares of the target's stock.
14. How are stock issuance costs and direct combination costs treated in a business
combination which is accounted for as an acquisition when the subsidiary will
retain its incorporation?
A. Stock issuance costs are a part of the acquisition costs, and the direct
combination costs are expensed.
B. Direct combination costs are a part of the acquisition costs, and the stock
issuance costs are a reduction to additional paid-in capital.
C. Direct combination costs are expensed and stock issuance costs are a reduction
to additional paid-in capital.
D. Both are treated as part of the acquisition consideration transferred.
E. Both are treated as a reduction to additional paid-in capital.
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15. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1,
20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and
a $47 fair value to obtain all of Vicker's outstanding stock. In this acquisition
transaction, how much goodwill should be recognized?
A. $144,000.
B. $104,000.
C. $64,000.
D. $60,000.
E. $0.
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16. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1,
20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and
a $42 fair value for all of the outstanding stock of Vicker. What is the consolidated
balance for Land as a result of this acquisition transaction?
A. $460,000.
B. $510,000.
C. $500,000.
D. $520,000.
E. $490,000.
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17. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1,
20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and
a $42 fair value for all of the outstanding shares of Vicker. What will be the
consolidated Additional Paid-In Capital and Retained Earnings (January 1, 20X1
balances) as a result of this acquisition transaction?
A. $60,000 and $490,000.
B. $60,000 and $250,000.
C. $380,000 and $250,000.
D. $464,000 and $250,000.
E. $464,000 and $420,000.
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18. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1,
20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen issued preferred stock with a par value of $240,000 and a fair
value of $500,000 for all of the outstanding shares of Vicker in an acquisition
business combination. What will be the balance in the consolidated Inventory and
Land accounts?
A. $440,000, $496,000.
B. $440,000, $520,000.
C. $425,000, $505,000.
D. $400,000, $500,000.
E. $427,000, $510,000.
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19. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1,
20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker.
In addition, Bullen paid $35,000 for secretarial and management time allocated to
the acquisition transaction. What will be the balance in consolidated goodwill?
A. $0.
B. $20,000.
C. $35,000.
D. $55,000.
E. $65,000.
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20. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1,
20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker.
In addition, Bullen paid $35,000 to a group of attorneys for their work in arranging
the combination to be accounted for as an acquisition. What will be the balance in
consolidated goodwill?
A. $0.
B. $20,000.
C. $35,000.
D. $55,000.
E. $65,000
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21. Prior to being united in a business combination, Botkins Inc. and Volkerson Corp.
had the following stockholders' equity figures:
Botkins issued 56,000 new shares of its common stock valued at $3.25 per share
for all of the outstanding stock of Volkerson.
Assume that Botkins acquired Volkerson on January 1, 2010. At what amount did
Botkins record the investment in Volkerson?
A. $56,000.
B. $182,000.
C. $209,000.
D. $261,000.
E. $312,000.
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22. Prior to being united in a business combination, Botkins Inc. and Volkerson Corp.
had the following stockholders' equity figures:
Botkins issued 56,000 new shares of its common stock valued at $3.25 per share
for all of the outstanding stock of Volkerson.
Assume that Botkins acquired Volkerson on January 1, 2010. Immediately
afterwards, what is consolidated Common Stock?
A. $456,000.
B. $402,000.
C. $274,000.
D. $276,000.
E. $330,000.
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23. Chapel Hill Company had common stock of $350,000 and retained earnings of
$490,000. Blue Town Inc. had common stock of $700,000 and retained earnings of
$980,000. On January 1, 2011, Blue Town issued 34,000 shares of common stock
with a $12 par value and a $35 fair value for all of Chapel Hill Company's
outstanding common stock. This combination was accounted for as an acquisition.
Immediately after the combination, what was the total consolidated net assets?
A. $2,520,000.
B. $1,190,000.
C. $1,680,000.
D. $2,870,000.
E. $2,030,000.
24. Which of the following is a not a reason for a business combination to take place?
A. Cost savings through elimination of duplicate facilities.
B. Quick entry for new and existing products into domestic and foreign markets.
C. Diversification of business risk.
D. Vertical integration.
E. Increase in stock price of the acquired company.
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25. Which of the following statements is true regarding a statutory merger?
A. The original companies dissolve while remaining as separate divisions of a
newly created company.
B. Both companies remain in existence as legal corporations with one corporation
now a subsidiary of the acquiring company.
C. The acquired company dissolves as a separate corporation and becomes a
division of the acquiring company.
D. The acquiring company acquires the stock of the acquired company as an
investment.
E. A statutory merger is no longer a legal option.
26. Which of the following statements is true regarding a statutory consolidation?
A. The original companies dissolve while remaining as separate divisions of a
newly created company.
B. Both companies remain in existence as legal corporations with one corporation
now a subsidiary of the acquiring company.
C. The acquired company dissolves as a separate corporation and becomes a
division of the acquiring company.
D. The acquiring company acquires the stock of the acquired company as an
investment.
E. A statutory consolidation is no longer a legal option.
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27. In a transaction accounted for using the acquisition method where consideration
transferred exceeds book value of the acquired company, which statement is true
for the acquiring company with regard to its investment?
A. Net assets of the acquired company are revalued to their fair values and any
excess of consideration transferred over fair value of net assets acquired is
allocated to goodwill.
B. Net assets of the acquired company are maintained at book value and any
excess of consideration transferred over book value of net assets acquired is
allocated to goodwill.
C. Acquired assets are revalued to their fair values. Acquired liabilities are
maintained at book values. Any excess is allocated to goodwill.
D. Acquired long-term assets are revalued to their fair values. Any excess is
allocated to goodwill.
28. In a transaction accounted for using the acquisition method where consideration
transferred is less than fair value of net assets acquired, which statement is true?
A. Negative goodwill is recorded.
B. A deferred credit is recorded.
C. A gain on bargain purchase is recorded.
D. Long-term assets of the acquired company are reduced in proportion to their
fair values. Any excess is recorded as a deferred credit.
E. Long-term assets and liabilities of the acquired company are reduced in
proportion to their fair values. Any excess is recorded as an extraordinary gain.
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29. Which of the following statements is true regarding the acquisition method of
accounting for a business combination?
A. Net assets of the acquired company are reported at their fair values.
B. Net assets of the acquired company are reported at their book values.
C. Any goodwill associated with the acquisition is reported as a development cost.
D. The acquisition can only be effected by a mutual exchange of voting common
stock.
E. Indirect costs of the combination reduce additional paid-in capital.
30. Which of the following statements is true?
A. The pooling of interests for business combinations is an alternative to the
acquisition method.
B. The purchase method for business combinations is an alternative to the
acquisition method.
C. Neither the purchase method nor the pooling of interests method is allowed
for new business combinations.
D. Any previous business combination originally accounted for under purchase or
pooling of interests accounting method will now be accounted for under the
acquisition method of accounting for business combinations.
E. Companies previously using the purchase or pooling of interests accounting
method must report a change in accounting principle when consolidating those
subsidiaries with new acquisition combinations.
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31. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
In this acquisition business combination, at what amount is the investment
recorded on Goodwin's books?
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A. $1,540.
B. $1,800.
C. $1,860.
D. $1,825.
E. $1,625.
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32. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
In this acquisition business combination, what total amount of common stock and
additional paid-in capital is recorded on Goodwin's books?
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A. $265.
B. $1,165.
C. $1,200.
D. $1,235.
E. $1,765.
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33. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated revenues for 20X1.
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A. $2,700.
B. $720.
C. $920.
D. $3,300.
E. $1,540.
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34. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated receivables and inventory for 20X1.
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A. $1,200.
B. $1,515.
C. $1,540.
D. $1,800.
E. $2,140.
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35. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated expenses for 20X1.
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A. $1,980.
B. $2,005.
C. $2,040.
D. $2,380.
E. $2,405.
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36. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated cash account at December 31, 20X1.
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A. $460.
B. $425.
C. $400.
D. $435.
E. $240.
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37. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated buildings (net) account at December 31, 20X1.
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Page 35
A. $2,700.
B. $3,370.
C. $3,300.
D. $3,260.
E. $3,340.
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Page 36
38. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated equipment (net) account at December 31, 20X1.
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Page 37
A. $2,100.
B. $3,500.
C. $3,300.
D. $3,000.
E. $3,200.
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Page 38
39. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consideration transferred for this acquisition at December 31, 20X1.
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Page 39
A. $900.
B. $1,165.
C. $1,200.
D. $1,765.
E. $1,800.
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Page 40
40. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the goodwill arising from this acquisition at December 31, 20X1.
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Page 41
A. $0.
B. $100.
C. $125.
D. $160.
E. $45.
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Page 42
41. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated common stock account at December 31, 20X1.
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Page 43
A. $1,080.
B. $1,480.
C. $1,380.
D. $2,280.
E. $2,680.
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Page 44
42. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated additional paid-in capital at December 31, 20X1.
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Page 45
A. $810.
B. $1,350.
C. $1,675.
D. $1,910.
E. $1,875.
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Page 46
43. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated liabilities at December 31, 20X1.
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Page 47
A. $1,500.
B. $2,100.
C. $2,320.
D. $2,920.
E. $2,885.
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Page 48
44. The financial statements for Goodwin, Inc., and Corr Company for the year ended
December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10 par
value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35 in
stock issuance costs. Corr's equipment was actually worth $1,400 but its buildings
were only valued at $560.
Compute the consolidated retained earnings at December 31, 20X1.
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Page 49
A. $2,800.
B. $2,825.
C. $2,850.
D. $3,425.
E. $3,450.
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Page 50
45. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
What amount was recorded as the investment in Osorio?
A. $930.
B. $820.
C. $800.
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Page 51
D. $835.
E. $815.
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Page 52
46. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
What amount was recorded as goodwill arising from this acquisition?
A. $230.
B. $120.
C. $520.
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Page 53
D. None. There is a gain on bargain purchase of $230.
E. None. There is a gain on bargain purchase of $265.
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Page 54
47. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated inventories at date of acquisition.
A. $1,080.
B. $1,350.
C. $1,360.
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Page 55
D. $1,370.
E. $290.
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Page 56
48. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated buildings (net) at date of acquisition.
A. $1,700.
B. $1,760.
C. $1,640.
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Page 57
D. $1,320.
E. $500.
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Page 58
49. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated land at date of acquisition.
A. $1,000.
B. $960.
C. $920.
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Page 59
D. $400.
E. $320.
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Page 60
50. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated equipment at date of acquisition.
A. $480.
B. $580.
C. $559.
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Page 61
D. $570.
E. $560.
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Page 62
51. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated common stock at date of acquisition.
A. $370.
B. $570.
C. $610.
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Page 63
D. $330.
E. $530.
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Page 64
52. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated additional paid-in capital at date of
acquisition.
A. $1,080.
B. $1,420.
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Page 65
C. $1,065.
D. $1,425.
E. $1,440.
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Page 66
53. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock having
a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to
lawyers, accountants, and brokers for assistance in bringing about this acquisition.
Another $15 was paid in connection with stock issuance costs. Prior to these
transactions, the balance sheets for the two companies were as follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on
the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated cash after recording the acquisition
transaction.
A. $220.
B. $185.
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Page 67
C. $200.
D. $205.
E. $215.
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Page 68
54. Carnes has the following account balances as of May 1, 2010 before an acquisition
transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
On May 1, 2010, what value is assigned to Riley's investment account?
A. $150,000.
B. $300,000.
C. $750,000.
D. $760,000.
E. $1,350,000.
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Page 69
55. Carnes has the following account balances as of May 1, 2010 before an acquisition
transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
At the date of acquisition, by how much does Riley's additional paid-in capital
increase or decrease?
A. $0.
B. $440,000 increase.
C. $450,000 increase.
D. $640,000 increase.
E. $650,000 decrease.
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Page 70
56. Carnes has the following account balances as of May 1, 2010 before an acquisition
transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
What will be Riley's balance in its common stock account as a result of this
acquisition?
A. $300,000.
B. $990,000.
C. $1,000,000.
D. $1,590,000.
E. $1,600,000.
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Page 71
57. Carnes has the following account balances as of May 1, 2010 before an acquisition
transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
What will be the consolidated additional paid-in capital as a result of this
acquisition?
A. $440,000.
B. $740,000.
C. $750,000.
D. $940,000.
E. $950,000.
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Page 72
58. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute the investment to be recorded at date of acquisition.
A. $1,750.
B. $1,760.
C. $1,775.
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Page 73
D. $1,300.
E. $1,120.
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Page 74
59. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute the consolidated common stock at date of acquisition.
A. $1,000.
B. $2,980.
C. $2,400.
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Page 75
D. $3,400.
E. $3,730.
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Page 76
60. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated inventory at the date of the acquisition.
A. $1,650.
B. $1,810.
C. $1,230.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 77
D. $580.
E. $1,830.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 78
61. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated land at the date of the acquisition.
A. $2,060.
B. $1,800.
C. $260.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 79
D. $2,050.
E. $2,070.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 80
62. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated buildings (net) at the date of the acquisition.
A. $2,450.
B. $2,340.
C. $1,800.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 81
D. $650.
E. $1,690.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 82
63. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated long-term liabilities at the date of the acquisition.
A. $2,600.
B. $2,700.
C. $2,800.
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Page 83
D. $3,720.
E. $3,820.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 84
64. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated goodwill at the date of the acquisition.
A. $360.
B. $450.
C. $460.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 85
D. $440.
E. $475.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 86
65. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated equipment (net) at the date of the acquisition.
A. $400.
B. $660.
C. $1,060.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 87
D. $1,040.
E. $1,050.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 88
66. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute fair value of the net assets acquired at the date of the acquisition.
A. $1,300.
B. $1,340.
C. $1,500.
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Page 89
D. $1,750.
E. $2,480.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 90
67. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated retained earnings at the date of the acquisition.
A. $1,160.
B. $1,170.
C. $1,280.
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Page 91
D. $1,290.
E. $1,640.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 92
68. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated revenues at the date of the acquisition.
A. $3,540.
B. $2,880.
C. $1,170.
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Page 93
D. $1,650.
E. $4,050.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 94
69. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated cash at the completion of the acquisition.
A. $1,350.
B. $1,085.
C. $1,110.
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Page 95
D. $870.
E. $845.
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Page 96
70. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated expenses at the date of the acquisition.
A. $2,760.
B. $2,770.
C. $2,785.
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Page 97
D. $3,380.
E. $3,390.
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Page 98
71. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 99
Compute the investment to be recorded at date of acquisition.
A. $1,750.
B. $1,755.
C. $1,725.
D. $1,760.
E. $1,765.
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Page 100
72. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 101
Compute consolidated inventory at date of acquisition.
A. $1,650.
B. $1,810.
C. $1,230.
D. $580.
E. $1,830.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 102
73. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 103
Compute consolidated land at date of acquisition.
A. $2,060.
B. $1,800.
C. $260.
D. $2,050.
E. $2,070.
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Page 104
74. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 105
Compute consolidated buildings (net) at date of acquisition.
A. $2,450.
B. $2,340.
C. $1,800.
D. $650.
E. $1,690.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 106
75. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 107
Compute consolidated goodwill at date of acquisition.
A. $440.
B. $442.
C. $450.
D. $455.
E. $452.
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Page 108
76. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 109
Compute consolidated equipment at date of acquisition.
A. $400.
B. $660.
C. $1,060.
D. $1,040.
E. $1,050.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 110
77. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 111
Compute consolidated retained earnings as a result of this acquisition.
A. $1,160.
B. $1,170.
C. $1,265.
D. $1,280.
E. $1,650.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 112
78. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 113
Compute consolidated revenues at date of acquisition.
A. $3,540.
B. $2,880.
C. $1,170.
D. $1,650.
E. $4,050.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 114
79. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 115
Compute consolidated expenses at date of acquisition.
A. $2,735.
B. $2,760.
C. $2,770.
D. $2,785.
E. $3,380.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 116
80. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood issued
50 shares of its common stock with a fair value of $35 per share for all of the
outstanding common shares of Franz. Stock issuance costs of $15 (in thousands)
and direct costs of $10 (in thousands) were paid to effect this acquisition
transaction. To settle a difference of opinion regarding Franz's fair value, Atwood
promises to pay an additional $5.2 (in thousands) to the former owners if Franz's
earnings exceed a certain sum during the next year. Given the probability of the
required contingency payment and utilizing a 4% discount rate, the expected
present value of the contingency is $5 (in thousands).
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Compute the consolidated cash upon completion of the acquisition.
A. $1,350.
B. $1,110.
C. $1,080.
D. $1,085.
E. $635.
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Page 118
81. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
By how much will Flynn's additional paid-in capital increase as a result of this
acquisition?
A. $150.
B. $160.
C. $230.
D. $350.
E. $360.
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Page 119
82. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for goodwill as a result of this acquisition?
A. $30.
B. $55.
C. $65.
D. $175.
E. $200.
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Page 120
83. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated receivables?
A. $660.
B. $640.
C. $500.
D. $460.
E. $480.
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Page 121
84. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated inventory?
A. $1,000.
B. $960.
C. $920.
D. $660.
E. $620.
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Page 122
85. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated buildings (net)?
A. $1,420.
B. $1,260.
C. $1,140.
D. $1,480.
E. $1,200.
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Page 123
86. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated equipment (net)?
A. $385.
B. $335.
C. $435.
D. $460.
E. $360.
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Page 124
87. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated long-term liabilities?
A. $1,520.
B. $1,480.
C. $1,440.
D. $1,180.
E. $1,100.
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Page 125
88. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated common stock?
A. $1,000.
B. $1,080.
C. $1,200.
D. $1,280.
E. $1,360.
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Page 126
89. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
Assuming the combination is accounted for as a purchase, what amount will be
reported for consolidated retained earnings?
A. $1,830.
B. $1,350.
C. $1,080.
D. $1,560.
E. $1,535.
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Page 127
90. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated retained earnings?
A. $1,065.
B. $1,080.
C. $1,525.
D. $1,535.
E. $1,560.
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Page 128
91. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated additional paid-in capital?
A. $365.
B. $350.
C. $360.
D. $375.
E. $345.
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Page 129
92. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An additional
$10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value. The
figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated cash after the acquisition is
completed?
A. $475.
B. $500.
C. $555.
D. $580.
E. $875.
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Page 130
Essay Questions
93. What term is used to refer to a business combination in which only one of the
original companies continues to exist?
94. How are stock issuance costs accounted for in an acquisition business
combination?
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Page 131
95. What is the primary difference between recording an acquisition when the
subsidiary is dissolved and when separate incorporation is maintained?
96. How are direct combination costs accounted for in an acquisition transaction?
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Page 132
97. Peterman Co. owns 55% of Samson Co. Under what circumstances would
Peterman not be required to prepare consolidated financial statements?
98. How would you account for in-process research and development acquired in a
business combination accounted for as an acquisition?
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Page 133
99. Elon Corp. obtained all of the common stock of Finley Co., paying slightly less
than the fair value of Finley's net assets acquired. How should the difference
between the consideration transferred and the fair value of the net assets be
treated if the transaction is accounted for as an acquisition?
100. For acquisition accounting, why are assets and liabilities of the subsidiary
consolidated at fair value?
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Page 134
101. Goodwill is often acquired as part of a business combination. Why, when separate
incorporation is maintained, does Goodwill not appear on the Parent company's
trial balance as a separate account?
102. How are direct combination costs, contingent consideration, and a bargain
purchase reflected in recording an acquisition transaction?
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Page 135
103. How is contingent consideration accounted for in an acquisition business
combination transaction?
104. How are bargain purchases accounted for in an acquisition business transaction?
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Page 136
105. Describe the accounting for direct costs, indirect costs, and issuance costs under
the acquisition method of accounting for a business combination.
106. What is the difference in consolidated results between a business combination
whereby the acquired company is dissolved, and a business combination whereby
separate incorporation is maintained?
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Page 137
Short Answer Questions
107. Bale Co. acquired Silo Inc. on December 31, 20X1, in an acquisition business
combination transaction. Bale's net income for the year was $1,400,000, while Silo
had net income of $400,000 earned evenly during the year. Bale paid $100,000 in
direct combination costs, $50,000 in indirect costs, and $30,000 in stock issue
costs to effect the combination.
Required:
What is consolidated net income for 20X1?
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Page 138
108. Fine Co. issued its common stock in exchange for the common stock of Dandy
Corp. in an acquisition. At the date of the combination, Fine had land with a book
value of $480,000 and a fair value of $620,000. Dandy had land with a book value
of $170,000 and a fair value of $190,000.
Required:
What was the consolidated balance for Land in a consolidated balance sheet
prepared at the date of the acquisition combination?
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Page 139
109. Jernigan Corp. had the following account balances at 12/1/10:
Several of Jernigan's accounts have fair values that differ from book value. The
fair values are: Land — $480,000; Building — $720,000; Inventory — $336,000;
and Liabilities — $396,000.
Inglewood Inc. acquired all of the outstanding common shares of Jernigan by
issuing 20,000 shares of common stock having a $6 par value, but a $66 fair
value. Stock issuance costs amounted to $12,000.
Required:
Prepare a fair value allocation and goodwill schedule at the date of the
acquisition.
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Page 140
110. Salem Co. had the following account balances as of December 1, 2010:
Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly issued
$30 par value common stock (valued at $90 per share) to acquire all of Salem's
outstanding common stock.
Determine the balance for Goodwill that would be included in a December 1, 2010,
consolidation.
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Page 141
111. Salem Co. had the following account balances as of December 1, 2010:
Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly issued
$30 par value common stock (valued at $90 per share) to acquire all of Salem's
outstanding common stock.
Assume that Bellington paid cash of $2.8 million. No stock is issued. An additional
$50,000 is paid in direct combination costs.
Required:
For Goodwill, determine what balance would be included in a December 1, 2010
consolidation.
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Page 142
112. On January 1, 2011, Chester Inc. acquired 100% of Festus Corp.'s outstanding
common stock by exchanging 37,500 shares of Chester's $2 par value common
voting stock. On January 1, 2011, Chester's voting common stock had a fair value
of $40 per share. Festus' voting common shares were selling for $6.50 per share.
Festus' balances on the acquisition date, just prior to acquisition are listed below.
Required:
Compute the value of the Goodwill account on the date of acquisition, 1/1/11.
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Page 143
113. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely's buildings
were undervalued on its financial records by $60,000.
On December 31, 2010, Jode issued 54,000 new shares of its $10 par value stock in
exchange for all the outstanding shares of Lakely. Jode's shares had a fair value on
that date of $35 per share. Jode paid $34,000 to an investment bank for assisting
in the arrangements. Jode also paid $24,000 in stock issuance costs to effect the
acquisition of Lakely. Lakely will retain its incorporation.
Prepare the journal entries to record (1) the issuance of stock by Jode and (2) the
payment of the combination costs.
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Page 144
114. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely's buildings
were undervalued on its financial records by $60,000.
On December 31, 2010, Jode issued 54,000 new shares of its $10 par value stock in
exchange for all the outstanding shares of Lakely. Jode's shares had a fair value on
that date of $35 per share. Jode paid $34,000 to an investment bank for assisting
in the arrangements. Jode also paid $24,000 in stock issuance costs to effect the
acquisition of Lakely. Lakely will retain its incorporation.
Required:
Determine consolidated net income for the year ended December 31, 2010.
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Page 145
115. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely's buildings
were undervalued on its financial records by $60,000.
On December 31, 2010, Jode issued 54,000 new shares of its $10 par value stock in
exchange for all the outstanding shares of Lakely. Jode's shares had a fair value on
that date of $35 per share. Jode paid $34,000 to an investment bank for assisting
in the arrangements. Jode also paid $24,000 in stock issuance costs to effect the
acquisition of Lakely. Lakely will retain its incorporation.
Determine consolidated Additional paid-in Capital at December 31, 2010.
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Page 146
116. The following are preliminary financial statements for Black Co. and Blue Co. for
the year ending December 31, 20X1.
On December 31, 20X1 (subsequent to the preceding statements), Black
exchanged 10,000 shares of its $10 par value common stock for all of the
outstanding shares of Blue. Black's stock on that date has a fair value of $50 per
share. Black was willing to issue 10,000 shares of stock because Blue's land was
appraised at $204,000. Black also paid $14,000 to several attorneys and
accountants who assisted in creating this combination.
Required:
Assuming that these two companies retained their separate legal identities,
prepare a consolidation worksheet as of December 31, 20X1 assuming the
transaction is treated as a purchase combination.
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Page 147
117. The following are preliminary financial statements for Black Co. and Blue Co. for
the year ending December 31, 20X1 prior to Black's acquisition of Blue.
On December 31, 20X1 (subsequent to the preceding statements), Black
exchanged 10,000 shares of its $10 par value common stock for all of the
outstanding shares of Blue. Black's stock on that date has a fair value of $60 per
share. Black was willing to issue 10,000 shares of stock because Blue's land was
appraised at $204,000. Black also paid $14,000 to several attorneys and
accountants who assisted in creating this combination.
Required:
Assuming that these two companies retained their separate legal identities,
prepare a consolidation worksheet as of December 31, 20X1 after the acquisition
transaction is completed.
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Page 148
118. For each of the following situations, select the best letter answer to reflect the
effect of the numbered item on the acquirer's accounting entry at the date of
combination when separate incorporation will be maintained. Items (4) and (6)
require two selections.
(A) Increase Investment account.
(B) Decrease Investment account.
(C) Increase Liabilities.
(D) Increase Common stock.
(E) Decrease common stock.
(F) Increase Additional paid-in capital.
(G) Decrease Additional paid-in capital.
(H) Increase Retained earnings
(I) Decrease Retained earnings
_____1. Direct costs.
_____2. Indirect costs.
_____3. Stock issue costs.
_____4. Contingent consideration.
_____5. Bargain purchase.
_____6. In-process research and development acquired.
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Page 149
Chapter 02 Consolidation of Financial Information Answer Key
Multiple Choice Questions
1. At the date of an acquisition which is not a bargain purchase, the acquisition
method
A. consolidates the subsidiary's assets at fair value and the liabilities at book
value.
B. consolidates all subsidiary assets and liabilities at book value.
C. consolidates all subsidiary assets and liabilities at fair value.
D. consolidates current assets and liabilities at book value, long-term assets and
liabilities at fair value.
E. consolidates the subsidiary's assets at book value and the liabilities at fair
value.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
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Page 150
2. In an acquisition where control is achieved, how would the land accounts of the
parent and the land accounts of the subsidiary be combined?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 151
3. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria
will continue to exist as a separate corporation. Entries for the consolidation of
Lisa and Victoria would be recorded in
A. a worksheet.
B. Lisa's general journal.
C. Victoria's general journal.
D. Victoria's secret consolidation journal.
E. the general journals of both companies.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 152
4. Using the acquisition method for a business combination, goodwill is generally
defined as:
A. Cost of the investment less the subsidiary's book value at the beginning of
the year.
B. Cost of the investment less the subsidiary's book value at the acquisition
date.
C. Cost of the investment less the subsidiary's fair value at the beginning of the
year.
D. Cost of the investment less the subsidiary's fair value at acquisition date.
E. is no longer allowed under federal law.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
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Page 153
5. Direct combination costs and stock issuance costs are often incurred in the
process of making a controlling investment in another company. How should
those costs be accounted for in a pre-2009 purchase transaction?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-09 Appendix: Identify the general characteristics of the legacy purchase and pooling of interest methods
of accounting for past business combinations. Understand the effects that persist today in financial statements from the use of
these legacy methods.
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Page 154
6. How are direct and indirect costs accounted for when applying the acquisition
method for a business combination?
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
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Page 155
7. What is the primary accounting difference between accounting for when the
subsidiary is dissolved and when the subsidiary retains its incorporation?
A. If the subsidiary is dissolved, it will not be operated as a separate division.
B. If the subsidiary is dissolved, assets and liabilities are consolidated at their
book values.
C. If the subsidiary retains its incorporation, there will be no goodwill associated
with the acquisition.
D. If the subsidiary retains its incorporation, assets and liabilities are
consolidated at their book values.
E. If the subsidiary retains its incorporation, the consolidation is not formally
recorded in the accounting records of the acquiring company.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 156
8. According to GAAP, the pooling of interest method for business combinations
A. Is preferred to the purchase method.
B. Is allowed for all new acquisitions.
C. Is no longer allowed for business combinations after June 30, 2001.
D. Is no longer allowed for business combinations after December 31, 2001.
E. Is only allowed for large corporate mergers like Exxon and Mobil.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-09 Appendix: Identify the general characteristics of the legacy purchase and pooling of interest methods
of accounting for past business combinations. Understand the effects that persist today in financial statements from the use of
these legacy methods.
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Page 157
9. An example of a difference in types of business combination is:
A. A statutory merger can only be effected by an asset acquisition while a
statutory consolidation can only be effected by a capital stock acquisition.
B. A statutory merger can only be effected by a capital stock acquisition while a
statutory consolidation can only be effected by an asset acquisition.
C. A statutory merger requires dissolution of the acquired company while a
statutory consolidation does not require dissolution.
D. A statutory consolidation requires dissolution of the acquired company while
a statutory merger does not require dissolution.
E. Both a statutory merger and a statutory consolidation can only be effected
by an asset acquisition but only a statutory consolidation requires dissolution
of the acquired company.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 02-03 Define the term business combination and differentiate across various forms of business
combinations.
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Page 158
10. Acquired in-process research and development is considered as
A. a definite-lived asset subject to amortization.
B. a definite-lived asset subject to testing for impairment.
C. an indefinite-lived asset subject to amortization.
D. an indefinite-lived asset subject to testing for impairment.
E. a research and development expense at the date of acquisition.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-08 Describe the two criteria for recognizing intangible assets apart from goodwill in a business
combination.
11. Which one of the following is a characteristic of a business combination
accounted for as an acquisition?
A. The combination must involve the exchange of equity securities only.
B. The transaction establishes an acquisition fair value basis for the company
being acquired.
C. The two companies may be about the same size, and it is difficult to
determine the acquired company and the acquiring company.
D. The transaction may be considered to be the uniting of the ownership
interests of the companies involved.
E. The acquired subsidiary must be smaller in size than the acquiring parent.
AACSB: Reflective thinking
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Page 159
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
12. Which one of the following is a characteristic of a business combination that is
accounted for as an acquisition?
A. Fair value only for items received by the acquirer can enter into the
determination of the acquirer's accounting valuation of the acquired
company.
B. Fair value only for the consideration transferred by the acquirer can enter
into the determination of the acquirer's accounting valuation of the acquired
company.
C. Fair value for the consideration transferred by the acquirer as well as the fair
value of items received by the acquirer can enter into the determination of
the acquirer's accounting valuation of the acquired company.
D. Fair value for only consideration transferred and identifiable assets received
by the acquirer can enter into the determination of the acquirer's accounting
valuation of the acquired company.
E. Only fair value of identifiable assets received enters into the determination of
the acquirer's accounting valuation of the acquired company.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
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Page 160
13. A statutory merger is a(n)
A. business combination in which only one of the two companies continues to
exist as a legal corporation.
B. business combination in which both companies continues to exist.
C. acquisition of a competitor.
D. acquisition of a supplier or a customer.
E. legal proposal to acquire outstanding shares of the target's stock.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-03 Define the term business combination and differentiate across various forms of business
combinations.
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Page 161
14. How are stock issuance costs and direct combination costs treated in a business
combination which is accounted for as an acquisition when the subsidiary will
retain its incorporation?
A. Stock issuance costs are a part of the acquisition costs, and the direct
combination costs are expensed.
B. Direct combination costs are a part of the acquisition costs, and the stock
issuance costs are a reduction to additional paid-in capital.
C. Direct combination costs are expensed and stock issuance costs are a
reduction to additional paid-in capital.
D. Both are treated as part of the acquisition consideration transferred.
E. Both are treated as a reduction to additional paid-in capital.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
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Page 162
15. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January
1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's
accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value
and a $47 fair value to obtain all of Vicker's outstanding stock. In this
acquisition transaction, how much goodwill should be recognized?
A. $144,000.
B. $104,000.
C. $64,000.
D. $60,000.
E. $0.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
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Page 163
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 164
16. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January
1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's
accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value
and a $42 fair value for all of the outstanding stock of Vicker. What is the
consolidated balance for Land as a result of this acquisition transaction?
A. $460,000.
B. $510,000.
C. $500,000.
D. $520,000.
E. $490,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
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Page 165
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 166
17. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January
1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's
accounts:
Assume that Bullen issued 12,000 shares of common stock with a $5 par value
and a $42 fair value for all of the outstanding shares of Vicker. What will be the
consolidated Additional Paid-In Capital and Retained Earnings (January 1, 20X1
balances) as a result of this acquisition transaction?
A. $60,000 and $490,000.
B. $60,000 and $250,000.
C. $380,000 and $250,000.
D. $464,000 and $250,000.
E. $464,000 and $420,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
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Page 167
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 168
18. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January
1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's
accounts:
Assume that Bullen issued preferred stock with a par value of $240,000 and a
fair value of $500,000 for all of the outstanding shares of Vicker in an
acquisition business combination. What will be the balance in the consolidated
Inventory and Land accounts?
A. $440,000, $496,000.
B. $440,000, $520,000.
C. $425,000, $505,000.
D. $400,000, $500,000.
E. $427,000, $510,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
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Page 169
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 170
19. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January
1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's
accounts:
Assume that Bullen paid a total of $480,000 in cash for all of the shares of
Vicker. In addition, Bullen paid $35,000 for secretarial and management time
allocated to the acquisition transaction. What will be the balance in
consolidated goodwill?
A. $0.
B. $20,000.
C. $35,000.
D. $55,000.
E. $65,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
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Page 171
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 172
20. Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January
1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to
creating the combination) follow, along with the book value of Bullen's
accounts:
Assume that Bullen paid a total of $480,000 in cash for all of the shares of
Vicker. In addition, Bullen paid $35,000 to a group of attorneys for their work in
arranging the combination to be accounted for as an acquisition. What will be
the balance in consolidated goodwill?
A. $0.
B. $20,000.
C. $35,000.
D. $55,000.
E. $65,000
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
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Page 173
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
21. Prior to being united in a business combination, Botkins Inc. and Volkerson
Corp. had the following stockholders' equity figures:
Botkins issued 56,000 new shares of its common stock valued at $3.25 per
share for all of the outstanding stock of Volkerson.
Assume that Botkins acquired Volkerson on January 1, 2010. At what amount
did Botkins record the investment in Volkerson?
A. $56,000.
B. $182,000.
C. $209,000.
D. $261,000.
E. $312,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
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Page 174
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
22. Prior to being united in a business combination, Botkins Inc. and Volkerson
Corp. had the following stockholders' equity figures:
Botkins issued 56,000 new shares of its common stock valued at $3.25 per
share for all of the outstanding stock of Volkerson.
Assume that Botkins acquired Volkerson on January 1, 2010. Immediately
afterwards, what is consolidated Common Stock?
A. $456,000.
B. $402,000.
C. $274,000.
D. $276,000.
E. $330,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 175
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
23. Chapel Hill Company had common stock of $350,000 and retained earnings of
$490,000. Blue Town Inc. had common stock of $700,000 and retained earnings
of $980,000. On January 1, 2011, Blue Town issued 34,000 shares of common
stock with a $12 par value and a $35 fair value for all of Chapel Hill Company's
outstanding common stock. This combination was accounted for as an
acquisition. Immediately after the combination, what was the total consolidated
net assets?
A. $2,520,000.
B. $1,190,000.
C. $1,680,000.
D. $2,870,000.
E. $2,030,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 176
24. Which of the following is a not a reason for a business combination to take
place?
A. Cost savings through elimination of duplicate facilities.
B. Quick entry for new and existing products into domestic and foreign
markets.
C. Diversification of business risk.
D. Vertical integration.
E. Increase in stock price of the acquired company.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Discuss the motives for business combinations.
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Page 177
25. Which of the following statements is true regarding a statutory merger?
A. The original companies dissolve while remaining as separate divisions of a
newly created company.
B. Both companies remain in existence as legal corporations with one
corporation now a subsidiary of the acquiring company.
C. The acquired company dissolves as a separate corporation and becomes a
division of the acquiring company.
D. The acquiring company acquires the stock of the acquired company as an
investment.
E. A statutory merger is no longer a legal option.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-03 Define the term business combination and differentiate across various forms of business
combinations.
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Page 178
26. Which of the following statements is true regarding a statutory consolidation?
A. The original companies dissolve while remaining as separate divisions of a
newly created company.
B. Both companies remain in existence as legal corporations with one
corporation now a subsidiary of the acquiring company.
C. The acquired company dissolves as a separate corporation and becomes a
division of the acquiring company.
D. The acquiring company acquires the stock of the acquired company as an
investment.
E. A statutory consolidation is no longer a legal option.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-03 Define the term business combination and differentiate across various forms of business
combinations.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 179
27. In a transaction accounted for using the acquisition method where
consideration transferred exceeds book value of the acquired company, which
statement is true for the acquiring company with regard to its investment?
A. Net assets of the acquired company are revalued to their fair values and any
excess of consideration transferred over fair value of net assets acquired is
allocated to goodwill.
B. Net assets of the acquired company are maintained at book value and any
excess of consideration transferred over book value of net assets acquired is
allocated to goodwill.
C. Acquired assets are revalued to their fair values. Acquired liabilities are
maintained at book values. Any excess is allocated to goodwill.
D. Acquired long-term assets are revalued to their fair values. Any excess is
allocated to goodwill.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Analyze
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
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Page 180
28. In a transaction accounted for using the acquisition method where
consideration transferred is less than fair value of net assets acquired, which
statement is true?
A. Negative goodwill is recorded.
B. A deferred credit is recorded.
C. A gain on bargain purchase is recorded.
D. Long-term assets of the acquired company are reduced in proportion to
their fair values. Any excess is recorded as a deferred credit.
E. Long-term assets and liabilities of the acquired company are reduced in
proportion to their fair values. Any excess is recorded as an extraordinary
gain.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 181
29. Which of the following statements is true regarding the acquisition method of
accounting for a business combination?
A. Net assets of the acquired company are reported at their fair values.
B. Net assets of the acquired company are reported at their book values.
C. Any goodwill associated with the acquisition is reported as a development
cost.
D. The acquisition can only be effected by a mutual exchange of voting
common stock.
E. Indirect costs of the combination reduce additional paid-in capital.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 182
30. Which of the following statements is true?
A. The pooling of interests for business combinations is an alternative to the
acquisition method.
B. The purchase method for business combinations is an alternative to the
acquisition method.
C. Neither the purchase method nor the pooling of interests method is allowed
for new business combinations.
D. Any previous business combination originally accounted for under purchase
or pooling of interests accounting method will now be accounted for under
the acquisition method of accounting for business combinations.
E. Companies previously using the purchase or pooling of interests accounting
method must report a change in accounting principle when consolidating
those subsidiaries with new acquisition combinations.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-09 Appendix: Identify the general characteristics of the legacy purchase and pooling of interest methods
of accounting for past business combinations. Understand the effects that persist today in financial statements from the use of
these legacy methods.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 183
31. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
In this acquisition business combination, at what amount is the investment
recorded on Goodwin's books?
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Page 184
A. $1,540.
B. $1,800.
C. $1,860.
D. $1,825.
E. $1,625.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 185
32. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
In this acquisition business combination, what total amount of common stock
and additional paid-in capital is recorded on Goodwin's books?
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Page 186
A. $265.
B. $1,165.
C. $1,200.
D. $1,235.
E. $1,765.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 187
33. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated revenues for 20X1.
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Page 188
A. $2,700.
B. $720.
C. $920.
D. $3,300.
E. $1,540.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 189
34. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated receivables and inventory for 20X1.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 190
A. $1,200.
B. $1,515.
C. $1,540.
D. $1,800.
E. $2,140.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 191
35. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated expenses for 20X1.
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Page 192
A. $1,980.
B. $2,005.
C. $2,040.
D. $2,380.
E. $2,405.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 193
36. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated cash account at December 31, 20X1.
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Page 194
A. $460.
B. $425.
C. $400.
D. $435.
E. $240.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 195
37. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated buildings (net) account at December 31, 20X1.
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Page 196
A. $2,700.
B. $3,370.
C. $3,300.
D. $3,260.
E. $3,340.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 197
38. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated equipment (net) account at December 31, 20X1.
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Page 198
A. $2,100.
B. $3,500.
C. $3,300.
D. $3,000.
E. $3,200.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 199
39. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consideration transferred for this acquisition at December 31,
20X1.
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Page 200
A. $900.
B. $1,165.
C. $1,200.
D. $1,765.
E. $1,800.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 201
40. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the goodwill arising from this acquisition at December 31, 20X1.
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Page 202
A. $0.
B. $100.
C. $125.
D. $160.
E. $45.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 203
41. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated common stock account at December 31, 20X1.
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Page 204
A. $1,080.
B. $1,480.
C. $1,380.
D. $2,280.
E. $2,680.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 205
42. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated additional paid-in capital at December 31, 20X1.
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Page 206
A. $810.
B. $1,350.
C. $1,675.
D. $1,910.
E. $1,875.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 207
43. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated liabilities at December 31, 20X1.
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Page 208
A. $1,500.
B. $2,100.
C. $2,320.
D. $2,920.
E. $2,885.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
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Page 209
44. The financial statements for Goodwin, Inc., and Corr Company for the year
ended December 31, 20X1, prior to Goodwin's acquisition business combination
transaction regarding Corr, follow (in thousands):
On December 31, 20X1, Goodwin issued $600 in debt and 30 shares of its $10
par value common stock to the owners of Corr to acquire all of the outstanding
shares of that company. Goodwin shares had a fair value of $40 per share.
Goodwin paid $25 to a broker for arranging the transaction. Goodwin paid $35
in stock issuance costs. Corr's equipment was actually worth $1,400 but its
buildings were only valued at $560.
Compute the consolidated retained earnings at December 31, 20X1.
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Page 210
A. $2,800.
B. $2,825.
C. $2,850.
D. $3,425.
E. $3,450.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 211
45. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
What amount was recorded as the investment in Osorio?
A. $930.
B. $820.
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Page 212
C. $800.
D. $835.
E. $815.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 213
46. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
What amount was recorded as goodwill arising from this acquisition?
A. $230.
B. $120.
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Page 214
C. $520.
D. None. There is a gain on bargain purchase of $230.
E. None. There is a gain on bargain purchase of $265.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 215
47. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated inventories at date of acquisition.
A. $1,080.
B. $1,350.
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Page 216
C. $1,360.
D. $1,370.
E. $290.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 217
48. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated buildings (net) at date of acquisition.
A. $1,700.
B. $1,760.
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Page 218
C. $1,640.
D. $1,320.
E. $500.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 219
49. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated land at date of acquisition.
A. $1,000.
B. $960.
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Page 220
C. $920.
D. $400.
E. $320.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 221
50. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated equipment at date of acquisition.
A. $480.
B. $580.
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Page 222
C. $559.
D. $570.
E. $560.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 223
51. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated common stock at date of acquisition.
A. $370.
B. $570.
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Page 224
C. $610.
D. $330.
E. $530.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 225
52. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated additional paid-in capital at date of
acquisition.
A. $1,080.
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Page 226
B. $1,420.
C. $1,065.
D. $1,425.
E. $1,440.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 227
53. On January 1, 20X1, the Moody Company entered into a transaction for 100% of
the outstanding common stock of Osorio Company. To acquire these shares,
Moody issued $400 in long-term liabilities and 40 shares of common stock
having a par value of $1 per share but a fair value of $10 per share. Moody paid
$20 to lawyers, accountants, and brokers for assistance in bringing about this
acquisition. Another $15 was paid in connection with stock issuance costs. Prior
to these transactions, the balance sheets for the two companies were as
follows:
Note: Parentheses indicate a credit balance.
In Moody's appraisal of Osorio, three assets were deemed to be undervalued
on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated cash after recording the acquisition
transaction.
A. $220.
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Page 228
B. $185.
C. $200.
D. $205.
E. $215.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 229
54. Carnes has the following account balances as of May 1, 2010 before an
acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
On May 1, 2010, what value is assigned to Riley's investment account?
A. $150,000.
B. $300,000.
C. $750,000.
D. $760,000.
E. $1,350,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 230
if dissolution does not take place.
55. Carnes has the following account balances as of May 1, 2010 before an
acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
At the date of acquisition, by how much does Riley's additional paid-in capital
increase or decrease?
A. $0.
B. $440,000 increase.
C. $450,000 increase.
D. $640,000 increase.
E. $650,000 decrease.
AACSB: Analytic
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Page 231
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 232
56. Carnes has the following account balances as of May 1, 2010 before an
acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
What will be Riley's balance in its common stock account as a result of this
acquisition?
A. $300,000.
B. $990,000.
C. $1,000,000.
D. $1,590,000.
E. $1,600,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
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Page 233
Difficulty: 1 Easy
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 234
57. Carnes has the following account balances as of May 1, 2010 before an
acquisition transaction takes place.
The fair value of Carnes' Land and Buildings are $650,000 and $550,000,
respectively. On May 1, 2010, Riley Company issues 30,000 shares of its $10 par
value ($25 fair value) common stock in exchange for all of the shares of Carnes'
common stock. Riley paid $10,000 for costs to issue the new shares of stock.
Before the acquisition, Riley has $700,000 in its common stock account and
$300,000 in its additional paid-in capital account.
What will be the consolidated additional paid-in capital as a result of this
acquisition?
A. $440,000.
B. $740,000.
C. $750,000.
D. $940,000.
E. $950,000.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
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Page 235
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 236
58. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute the investment to be recorded at date of acquisition.
A. $1,750.
B. $1,760.
C. $1,775.
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Page 237
D. $1,300.
E. $1,120.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 238
59. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute the consolidated common stock at date of acquisition.
A. $1,000.
B. $2,980.
C. $2,400.
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Page 239
D. $3,400.
E. $3,730.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 240
60. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated inventory at the date of the acquisition.
A. $1,650.
B. $1,810.
C. $1,230.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 241
D. $580.
E. $1,830.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 242
61. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated land at the date of the acquisition.
A. $2,060.
B. $1,800.
C. $260.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 243
D. $2,050.
E. $2,070.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 244
62. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated buildings (net) at the date of the acquisition.
A. $2,450.
B. $2,340.
C. $1,800.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 245
D. $650.
E. $1,690.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 246
63. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated long-term liabilities at the date of the acquisition.
A. $2,600.
B. $2,700.
C. $2,800.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 247
D. $3,720.
E. $3,820.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 248
64. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated goodwill at the date of the acquisition.
A. $360.
B. $450.
C. $460.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 249
D. $440.
E. $475.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 250
65. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated equipment (net) at the date of the acquisition.
A. $400.
B. $660.
C. $1,060.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 251
D. $1,040.
E. $1,050.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 252
66. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute fair value of the net assets acquired at the date of the acquisition.
A. $1,300.
B. $1,340.
C. $1,500.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 253
D. $1,750.
E. $2,480.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 254
67. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated retained earnings at the date of the acquisition.
A. $1,160.
B. $1,170.
C. $1,280.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 255
D. $1,290.
E. $1,640.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 256
68. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated revenues at the date of the acquisition.
A. $3,540.
B. $2,880.
C. $1,170.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 257
D. $1,650.
E. $4,050.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 258
69. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated cash at the completion of the acquisition.
A. $1,350.
B. $1,085.
C. $1,110.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 259
D. $870.
E. $845.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 260
70. The financial balances for the Atwood Company and the Franz Company as of
December 31, 20X1, are presented below. Also included are the fair values for
Franz Company's net assets.
Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1.
Atwood issued 50 shares of its common stock with a fair value of $35 per share
for all of the outstanding common shares of Franz. Stock issuance costs of $15
(in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated expenses at the date of the acquisition.
A. $2,760.
B. $2,770.
C. $2,785.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 261
D. $3,380.
E. $3,390.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 262
71. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 263
Compute the investment to be recorded at date of acquisition.
A. $1,750.
B. $1,755.
C. $1,725.
D. $1,760.
E. $1,765.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 264
72. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 265
Compute consolidated inventory at date of acquisition.
A. $1,650.
B. $1,810.
C. $1,230.
D. $580.
E. $1,830.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 266
73. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 267
Compute consolidated land at date of acquisition.
A. $2,060.
B. $1,800.
C. $260.
D. $2,050.
E. $2,070.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 268
74. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 269
Compute consolidated buildings (net) at date of acquisition.
A. $2,450.
B. $2,340.
C. $1,800.
D. $650.
E. $1,690.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 270
75. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 271
Compute consolidated goodwill at date of acquisition.
A. $440.
B. $442.
C. $450.
D. $455.
E. $452.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 272
76. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 273
Compute consolidated equipment at date of acquisition.
A. $400.
B. $660.
C. $1,060.
D. $1,040.
E. $1,050.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 274
77. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 275
Compute consolidated retained earnings as a result of this acquisition.
A. $1,160.
B. $1,170.
C. $1,265.
D. $1,280.
E. $1,650.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 276
78. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 277
Compute consolidated revenues at date of acquisition.
A. $3,540.
B. $2,880.
C. $1,170.
D. $1,650.
E. $4,050.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 278
79. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 279
Compute consolidated expenses at date of acquisition.
A. $2,735.
B. $2,760.
C. $2,770.
D. $2,785.
E. $3,380.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 280
80. Presented below are the financial balances for the Atwood Company and the
Franz Company as of December 31, 2010, immediately before Atwood acquired
Franz. Also included are the fair values for Franz Company's net assets at that
date.
Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. Atwood
issued 50 shares of its common stock with a fair value of $35 per share for all of
the outstanding common shares of Franz. Stock issuance costs of $15 (in
thousands) and direct costs of $10 (in thousands) were paid to effect this
acquisition transaction. To settle a difference of opinion regarding Franz's fair
value, Atwood promises to pay an additional $5.2 (in thousands) to the former
owners if Franz's earnings exceed a certain sum during the next year. Given the
probability of the required contingency payment and utilizing a 4% discount
rate, the expected present value of the contingency is $5 (in thousands).
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 281
Compute the consolidated cash upon completion of the acquisition.
A. $1,350.
B. $1,110.
C. $1,080.
D. $1,085.
E. $635.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 282
81. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
By how much will Flynn's additional paid-in capital increase as a result of this
acquisition?
A. $150.
B. $160.
C. $230.
D. $350.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 283
E. $360.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 284
82. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for goodwill as a result of this acquisition?
A. $30.
B. $55.
C. $65.
D. $175.
E. $200.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 285
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 286
83. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated receivables?
A. $660.
B. $640.
C. $500.
D. $460.
E. $480.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 287
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 288
84. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated inventory?
A. $1,000.
B. $960.
C. $920.
D. $660.
E. $620.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 289
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 290
85. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated buildings (net)?
A. $1,420.
B. $1,260.
C. $1,140.
D. $1,480.
E. $1,200.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 291
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 292
86. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated equipment (net)?
A. $385.
B. $335.
C. $435.
D. $460.
E. $360.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 293
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 294
87. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated long-term liabilities?
A. $1,520.
B. $1,480.
C. $1,440.
D. $1,180.
E. $1,100.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 295
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 296
88. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated common stock?
A. $1,000.
B. $1,080.
C. $1,200.
D. $1,280.
E. $1,360.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 297
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 298
89. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
Assuming the combination is accounted for as a purchase, what amount will be
reported for consolidated retained earnings?
A. $1,830.
B. $1,350.
C. $1,080.
D. $1,560.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 299
E. $1,535.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-09 Appendix: Identify the general characteristics of the legacy purchase and pooling of interest methods
of accounting for past business combinations. Understand the effects that persist today in financial statements from the use of
these legacy methods.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 300
90. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated retained earnings?
A. $1,065.
B. $1,080.
C. $1,525.
D. $1,535.
E. $1,560.
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Page 301
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 302
91. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated additional paid-in capital?
A. $365.
B. $350.
C. $360.
D. $375.
E. $345.
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Page 303
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 304
92. Flynn acquires 100 percent of the outstanding voting shares of Macek Company
on January 1, 20X1. To obtain these shares, Flynn pays $400 cash (in thousands)
and issues 10,000 shares of $20 par value common stock on this date. Flynn's
stock had a fair value of $36 per share on that date. Flynn also pays $15 (in
thousands) to a local investment firm for arranging the acquisition. An
additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 20X1 follow. The fair
value of each of Flynn and Macek accounts is also included. In addition, Macek
holds a fully amortized trademark that still retains a $40 (in thousands) value.
The figures below are in thousands. Any related question also is in thousands.
What amount will be reported for consolidated cash after the acquisition is
completed?
A. $475.
B. $500.
C. $555.
D. $580.
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Page 305
E. $875.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Essay Questions
93. What term is used to refer to a business combination in which only one of the
original companies continues to exist?
The appropriate term is statutory merger.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-03 Define the term business combination and differentiate across various forms of business
combinations.
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Page 306
94. How are stock issuance costs accounted for in an acquisition business
combination?
Stock issuance costs reduce the balance in the acquirer's Additional Paid-In
Capital in an acquisition business combination.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
95. What is the primary difference between recording an acquisition when the
subsidiary is dissolved and when separate incorporation is maintained?
When the subsidiary is dissolved, the acquirer records in its books the fair value
of individual assets and liabilities acquired as well as the resulting goodwill from
the acquisition. However, when separate incorporation is maintained, the
acquirer only records the total fair value of assets and liabilities acquired, as well
as the resulting goodwill, in one account as an investment.
AACSB: Reflective thinking
AICPA FN: Measurement
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Page 307
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
96. How are direct combination costs accounted for in an acquisition transaction?
In an acquisition, direct combination costs are expensed in the period of the
acquisition.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 308
97. Peterman Co. owns 55% of Samson Co. Under what circumstances would
Peterman not be required to prepare consolidated financial statements?
Peterman would not be required to prepare consolidated financial statements if
control of Samson is temporary or if, despite majority ownership, Peterman
does not have control over Samson. A lack of control might exist if Samson is in
a country that imposes restrictions on Peterman's actions.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 Recognize when consolidation of financial information into a single set of statements is necessary.
Learning Objective: 02-03 Define the term business combination and differentiate across various forms of business
combinations.
98. How would you account for in-process research and development acquired in a
business combination accounted for as an acquisition?
In-Process Research and Development is capitalized as an asset of the
combination and reported as intangible assets with indefinite lives subject to
impairment reviews.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
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Page 309
Learning Objective: 02-08 Describe the two criteria for recognizing intangible assets apart from goodwill in a business
combination.
99. Elon Corp. obtained all of the common stock of Finley Co., paying slightly less
than the fair value of Finley's net assets acquired. How should the difference
between the consideration transferred and the fair value of the net assets be
treated if the transaction is accounted for as an acquisition?
The difference between the consideration transferred and the fair value of the
net assets acquired is recognized as a gain on bargain purchase.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
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Page 310
100. For acquisition accounting, why are assets and liabilities of the subsidiary
consolidated at fair value?
The acquisition transaction is assumed to occur through an orderly transaction
between market participants at the measurement date of the acquisition. Thus
identified assets and liabilities acquired have been assigned fair value for the
transfer to the acquirer and this is a relevant and faithful representation for
consolidation.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
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Page 311
101. Goodwill is often acquired as part of a business combination. Why, when
separate incorporation is maintained, does Goodwill not appear on the Parent
company's trial balance as a separate account?
While the Goodwill does not appear on the Parent company's books, it is
implied as part of the account called Investment in Subsidiary. During the
consolidation process, the Investment account is broken down into its
component parts. Goodwill, along with other items such as subsidiary fair value
adjustments, is then shown separately as part of the consolidated financial
statement balances.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-08 Describe the two criteria for recognizing intangible assets apart from goodwill in a business
combination.
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Page 312
102. How are direct combination costs, contingent consideration, and a bargain
purchase reflected in recording an acquisition transaction?
The acquisition method embraces a fair value concept as measured by the fair
value of consideration transferred. (1) Direct combination costs are expensed as
incurred; (2) Contingent consideration obligations are recognized at their
present value of the potential obligation as part of the acquisition consideration
transferred; (3) When a bargain purchase occurs, the acquirer measures and
recognizes the fair values of each of the assets acquired and liabilities assumed
at the date of the combination, and as a result a gain on the bargain purchase
is recognized at the acquisition date.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 313
103. How is contingent consideration accounted for in an acquisition business
combination transaction?
The fair value approach of the acquisition method views contingent payments
as part of the consideration transferred. Under this view, contingencies have a
value to those who receive the consideration and represent measurable
obligations of the acquirer. The amount of the contingent consideration is
measured as the expected present value of a potential payment and increases
the investment value recorded.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
104. How are bargain purchases accounted for in an acquisition business
transaction?
A bargain purchase results when the collective fair values of the net identified
assets acquired and liabilities assumed exceed the fair value of consideration
transferred. The assets and liabilities acquired are recorded at their fair values
and the bargain purchase is recorded as a Gain on Bargain Purchase.
AACSB: Reflective thinking
AICPA FN: Measurement
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Page 314
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
105. Describe the accounting for direct costs, indirect costs, and issuance costs
under the acquisition method of accounting for a business combination.
Direct and indirect combination costs are expensed and issuance costs reduce
the otherwise fair value of the consideration issued under the acquisition
method of accounting for business combinations.
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
106. What is the difference in consolidated results between a business combination
whereby the acquired company is dissolved, and a business combination
whereby separate incorporation is maintained?
There is no difference in consolidated results.
AACSB: Reflective thinking
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Page 315
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Short Answer Questions
107. Bale Co. acquired Silo Inc. on December 31, 20X1, in an acquisition business
combination transaction. Bale's net income for the year was $1,400,000, while
Silo had net income of $400,000 earned evenly during the year. Bale paid
$100,000 in direct combination costs, $50,000 in indirect costs, and $30,000 in
stock issue costs to effect the combination.
Required:
What is consolidated net income for 20X1?
Note: Silo's net income does not affect consolidated net income until after the
date of acquisition. The combination costs belong to Bale only.
AACSB: Analytic
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Page 316
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
108. Fine Co. issued its common stock in exchange for the common stock of Dandy
Corp. in an acquisition. At the date of the combination, Fine had land with a
book value of $480,000 and a fair value of $620,000. Dandy had land with a
book value of $170,000 and a fair value of $190,000.
Required:
What was the consolidated balance for Land in a consolidated balance sheet
prepared at the date of the acquisition combination?
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 317
109. Jernigan Corp. had the following account balances at 12/1/10:
Several of Jernigan's accounts have fair values that differ from book value. The
fair values are: Land — $480,000; Building — $720,000; Inventory — $336,000;
and Liabilities — $396,000.
Inglewood Inc. acquired all of the outstanding common shares of Jernigan by
issuing 20,000 shares of common stock having a $6 par value, but a $66 fair
value. Stock issuance costs amounted to $12,000.
Required:
Prepare a fair value allocation and goodwill schedule at the date of the
acquisition.
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Page 318
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 319
110. Salem Co. had the following account balances as of December 1, 2010:
Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly
issued $30 par value common stock (valued at $90 per share) to acquire all of
Salem's outstanding common stock.
Determine the balance for Goodwill that would be included in a December 1,
2010, consolidation.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 320
if dissolution does not take place.
111. Salem Co. had the following account balances as of December 1, 2010:
Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly
issued $30 par value common stock (valued at $90 per share) to acquire all of
Salem's outstanding common stock.
Assume that Bellington paid cash of $2.8 million. No stock is issued. An
additional $50,000 is paid in direct combination costs.
Required:
For Goodwill, determine what balance would be included in a December 1, 2010
consolidation.
AACSB: Analytic
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Page 321
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 322
112. On January 1, 2011, Chester Inc. acquired 100% of Festus Corp.'s outstanding
common stock by exchanging 37,500 shares of Chester's $2 par value common
voting stock. On January 1, 2011, Chester's voting common stock had a fair
value of $40 per share. Festus' voting common shares were selling for $6.50 per
share. Festus' balances on the acquisition date, just prior to acquisition are
listed below.
Required:
Compute the value of the Goodwill account on the date of acquisition, 1/1/11.
AACSB: Analytic
AICPA FN: Measurement
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Page 323
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 324
113. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely's buildings
were undervalued on its financial records by $60,000.
On December 31, 2010, Jode issued 54,000 new shares of its $10 par value stock
in exchange for all the outstanding shares of Lakely. Jode's shares had a fair
value on that date of $35 per share. Jode paid $34,000 to an investment bank
for assisting in the arrangements. Jode also paid $24,000 in stock issuance costs
to effect the acquisition of Lakely. Lakely will retain its incorporation.
Prepare the journal entries to record (1) the issuance of stock by Jode and (2)
the payment of the combination costs.
Entry One - To record the issuance of common stock by Jode to execute the
purchase.
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Page 325
Entry Two - To record the combination costs.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 326
114. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely's buildings
were undervalued on its financial records by $60,000.
On December 31, 2010, Jode issued 54,000 new shares of its $10 par value stock
in exchange for all the outstanding shares of Lakely. Jode's shares had a fair
value on that date of $35 per share. Jode paid $34,000 to an investment bank
for assisting in the arrangements. Jode also paid $24,000 in stock issuance costs
to effect the acquisition of Lakely. Lakely will retain its incorporation.
Required:
Determine consolidated net income for the year ended December 31, 2010.
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Page 327
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 328
115. The financial statements for Jode Inc. and Lakely Corp., just prior to their
combination, for the year ending December 31, 2010, follow. Lakely's buildings
were undervalued on its financial records by $60,000.
On December 31, 2010, Jode issued 54,000 new shares of its $10 par value stock
in exchange for all the outstanding shares of Lakely. Jode's shares had a fair
value on that date of $35 per share. Jode paid $34,000 to an investment bank
for assisting in the arrangements. Jode also paid $24,000 in stock issuance costs
to effect the acquisition of Lakely. Lakely will retain its incorporation.
Determine consolidated Additional paid-in Capital at December 31, 2010.
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Page 329
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
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Page 330
116. The following are preliminary financial statements for Black Co. and Blue Co. for
the year ending December 31, 20X1.
On December 31, 20X1 (subsequent to the preceding statements), Black
exchanged 10,000 shares of its $10 par value common stock for all of the
outstanding shares of Blue. Black's stock on that date has a fair value of $50 per
share. Black was willing to issue 10,000 shares of stock because Blue's land was
appraised at $204,000. Black also paid $14,000 to several attorneys and
accountants who assisted in creating this combination.
Required:
Assuming that these two companies retained their separate legal identities,
prepare a consolidation worksheet as of December 31, 20X1 assuming the
transaction is treated as a purchase combination.
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Page 331
Bargain Purchase Acquisition Consolidation Worksheet
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Page 332
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 333
117. The following are preliminary financial statements for Black Co. and Blue Co. for
the year ending December 31, 20X1 prior to Black's acquisition of Blue.
On December 31, 20X1 (subsequent to the preceding statements), Black
exchanged 10,000 shares of its $10 par value common stock for all of the
outstanding shares of Blue. Black's stock on that date has a fair value of $60 per
share. Black was willing to issue 10,000 shares of stock because Blue's land was
appraised at $204,000. Black also paid $14,000 to several attorneys and
accountants who assisted in creating this combination.
Required:
Assuming that these two companies retained their separate legal identities,
prepare a consolidation worksheet as of December 31, 20X1 after the
acquisition transaction is completed.
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Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 334
Acquisition Consolidation Worksheet
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Page 335
AACSB: Analytic
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Full file at https://testbankuniv.eu/Fundamentals-of-Advanced-Accounting-5th-Edition-Hoyle-Test-Bank
Page 336
118. For each of the following situations, select the best letter answer to reflect the
effect of the numbered item on the acquirer's accounting entry at the date of
combination when separate incorporation will be maintained. Items (4) and (6)
require two selections.
(A) Increase Investment account.
(B) Decrease Investment account.
(C) Increase Liabilities.
(D) Increase Common stock.
(E) Decrease common stock.
(F) Increase Additional paid-in capital.
(G) Decrease Additional paid-in capital.
(H) Increase Retained earnings
(I) Decrease Retained earnings
_____1. Direct costs.
_____2. Indirect costs.
_____3. Stock issue costs.
_____4. Contingent consideration.
_____5. Bargain purchase.
_____6. In-process research and development acquired.
(1) I; (2) I; (3) G; (4) A, C; (5) H; (6) A, I
AACSB: Reflective thinking
AICPA FN: Measurement
Blooms: Understand
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Page 337
Difficulty: 2 Medium
Learning Objective: 02-04 Describe the valuation principles of the acquisition method.
Learning Objective: 02-05 Determine the total fair value of the consideration transferred for an acquisition and allocate that fair
value to specific subsidiary assets acquired (including goodwill); and liabilities assumed; or a gain on bargain purchase.
Learning Objective: 02-06 Prepare the journal entry to consolidate the accounts of a subsidiary if dissolution takes place.
Learning Objective: 02-07 Prepare a worksheet to consolidate the accounts of two companies that form a business combination
if dissolution does not take place.
Learning Objective: 02-08 Describe the two criteria for recognizing intangible assets apart from goodwill in a business
combination.
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